- Icelanders turn from finance to fishing
- Grain piles up in ports as buyers can't get letters of credit
- Watching crime for signs of an upsurge
- Currency market goes crazy
- An interactive map of US financial troubles
- Ukraine wonders if it can afford an election
- GM now worth less than it was in 1929.
Copyright © 2009 by The Atlantic Monthly Group. All rights reserved.
Okay, now that last one is really frightening - I've heard about most of the rest, but I had no idea GM was being so badly browbeaten that it would be below its 1929 market cap in nominal dollars.
Then again, there was no Toyota in 1929.
For some reason, the dollar seems to strengthen against the euro as the Dow Jones and S & P plummet ever lower. Why this is, I don't know. Do the currency traders know something about the EU that we don't? Is the EU less able to deal with the crisis than the Fed or Japanese Central Bank? Is the euro even less able to handle the liquidity infusion from an inflation perspective than the greenback? Again, I don't know.
"Then again, there was no Toyota in 1929."
No UAW either ;)
GM could thrive with the UAW OR competition from Toyota, but not both at that the same time (not when Toyota doesn't have to deal with the UAW).
Of course, at this point, GM's market cap doesn't represent the value of the company or its assets so much as the probability that equity will be wiped out in a bankruptcy re-org.
The Dollar is strengthening against the Euro because the EU member nations have not been able to come up with a strategy to deal with the current problems taking place - each individual EU membe is pursuing policies for it's own gain, often at the expense of the others. Furthermore the meltdown of Iceland is exposing the fact that a great number of Europeans in the EU were using Icelandic banks (mainly because they bore slightly higher interest rates)
As an aside, the stocks of Euroland are falling even faster and harder than the stocks of the US, so that isn't even a factor.
Whoa, I usually read in RSS, and when I clicked over here, I thought it was the wrong blog.
Anyway, I'm surprised someone hasn't written an article claiming that the financial crisis will cause global warming.
GM could thrive with the UAW OR competition from Toyota, but not both at that the same time (not when Toyota doesn't have to deal with the UAW).
I doubt it. It seems to me one or two of the European car-makers are doing relatively well. I'm aware of issue with health insurance in the US, but even considering healthcare costs, does GM pay more per American worker than, say, Daimler-Benz pays its German workers?
GM's problems are mostly the result of bad management. They don't make very good cars, and there aren't enough gullible consumers left in rich countries (but yeah, they're doing a bang-up job in China).
I doubt it. It seems to me one or two of the European car-makers are doing relatively well.
So are Ford's and GM's European divisions. As are their divisions pretty much everywhere but North America.
I'm aware of issue with health insurance in the US, but even considering healthcare costs, does GM pay more per American worker than, say, Daimler-Benz pays its German workers?
No, no. GM's main problem is not American health care nor competition from imports. The problem is competition from Toyota, Honda, et al *IN* the U.S. All of the Asian manufacturers (and Europeans as well) have set up shop in the American south (Tennessee, Kentucky, Alamaba, etc) and have non-union plants there with much lower costs than Detroit (even though these non-union workers are provided with employer-based health insurance). All the high-volume 'Japanese' cars in North America are produced domestically (and many are designed and engineered domestically as well).
GM's problems are mostly the result of bad management. They don't make very good cars.
Again, this is a North American-specific issue. I believe the Opel Astra is the first or second highest selling car in Europe, no? That's a GM product. GM has problem matching Toyota and Honda in bang-for-the-buck in North America because of higher costs. It seems like you get less car for the money because, well, you do.
The Dollar is strengthening against the Euro because the EU member nations have not been able to come up with a strategy to deal with the current problems taking place - each individual EU membe is pursuing policies for it's own gain, often at the expense of the others.
In other words, if you're going to lose, pick the best loser. Barring complete catastrophe, the dollar may be devalued by the current emergency actions of the Fed but it will at least re-emerge from the global crisis with a single, multi-trillion dollar economy and a single, reasonably cohesive monetary policy behind it.
A euro may be a euro the world around but there are a dozen cooks in the kitchen, all fighting for control of the pot.
GM has problem matching Toyota and Honda in bang-for-the-buck in North America because of higher costs.
So why the hell haven't the big three decamped to Alabama?
Jasper: Bad press, costs too much, whatever.
The big 3 are like lobsters put in a pot that is slowly heating up. They just stayed in denial until it was way too hot.
The fall of the Big 3 has been heating up since before I was born. Frankly its a statement to their strength and hold on the American imagination that they have managed to hold on as long as they have. Its sad that they have stayed in denial so long; if GM had filed back in 2000 or 2005, they might be equipped to handle these economic shocks. Now they are going to get ripped to shreds.
Ford had the best chance to come out of this a viable car company. Who knows now though. Getting these companies healthy would be hard enough in good times; in these times it may be impossible.
Also, I believe GM has pension and health care obligations for their retirees, and an older workforce with higher health care costs.
The domestics have about 2500 in extra labor expenses per car b/c of the UAW.
I think that is the root of the problem. In small cars the profit margin is a few hundred bucks; a 2500 labor cost is a massive impediment to competing. So they cut corners, which cuts in to brand reputation, people go elsewhere, so they have to cut more corners, which sends more people away... nasty spiral.
Bad press, costs too much, whatever.
Well, they've had sufficient capital over the years to expand facilities outside the US. Can't see why it would be impossibly expensive to building factories south of the M-D Line. And if you're more concerned with bad press than you are with shareholder value, I don't think you're entitled to taxpayer cash to make up for it now.
The fall of the Big 3 has been heating up since before I was born.
Well, that's the thing. I mean, I'm not oblivious to the human toll their decline has taken in lots of places in America. But they've literally had decades to right the ship. At least AIG's problems have been fairly recent, and a very short time ago they were a widely-admired, immensely profitable firm...
Brings to mind what someone once said about doing the same thing over and over and expecting a different result.
"So why the hell haven't the big three decamped to Alabama?"
Because it wouldn't help -- the UAW would be there too. The Big 3 can't open non-union plants in the U.S. because the UAW would strike their existing plants. GM and Ford, at least, have long had plants in the south, but the labor costs were the same, and they're closing those up. They just closed their plants in Georgia, for example:
http://www.ajc.com/metro/content/metro/dekalb/stories/2008/09/21/doraville_gm_plant.html
Hyundai, on the other hand, will soon be opening a non-union plant in Georgia:
http://www.motorauthority.com/georgia-plant-to-build-new-small-car-for-kia-and-possibly-hyundai.html
See how it works?
Ford had the best chance to come out of this a viable car company.
That chance died four years ago when Toyota set their sites on producing a "real" full-size truck for the US market, as Ford makes money predominantly on the strong-selling F150, while Toyota can sell a majority of its cars and trucks profitably by virtue of its reputation for quality and reliability.
Can't see why it would be impossibly expensive to building factories south of the M-D Line.
Think Rio Grande rather than Mason-Dixon. One thing that GM and Ford have done to sidestep the UAW is build plants in Mexico and export to the U.S. The Ford Fusion (Ford's highest volume midsize car) is built in Hermosillo, Mexico, while the Honda Accord and Toyota Camry are built in the U.S. Funny world.
http://www.iht.com/articles/2006/07/20/yourmoney/mexcar.php
But producing in Mexico doesn't help much either because, with shrinking market share, Ford and GM had to keep paying the UAW members who weren't building cars (the jobs bank). They tried to dig their way out of *that* problem by buying out tens of thousands of UAW workers. But those buyouts cost billions that it turns out they're really going to need. And so it goes.
It is quite interesting to see, from the FT interactive map, just how geographically concentrated foreclosures are. Only four states are in the "above average" category.
Peter, that's right. A few days ago, I suggested that if we can't blame this crisis on either the left or the right, maybe we could blame it on California.
However, the map has some oddities. Kentucky, for example, is average in all four categories, yet its overall rating is "worst." Why?
Re: Icelanders turn to fishing.
While this is not so good for the Icelanders, it is probably a good sign of social evolution. If I recall my history, last time the Icelanders got into trouble they went back to raiding the coasts of Ireland and England. I can just imagine a group of ex-Icelandic bankers, wading ashore with axes to loot the local monastery.
Whereas we can ask Warren Buffett for bailouts, Iceland must ask Bjork. On the other hand, they're a smaller country, so it just might work.